On the morning of February 2 in Hanoi, the State Securities Commission (SSC) in coordination with the International Finance Corporation (IFC) held a launching ceremony for the 2025 Corporate Governance Handbook, aiming to improve the quality of corporate governance in the context of the market increasingly posing high requirements for transparency and sustainable development.
There is still a lack of emotion and system in risk management
Sharing at the event, Mr. Hoang Duc Hung - Chairman of IIA Vietnam - commented that most Vietnamese enterprises are still approaching risk management in an emotional, lacking system and not connected to strategic goals. According to him, the concept of risk management needs to be understood more broadly as risk management, because it does not only include control, but also the orientation of business operations.
One of the reasons for ineffective risk management is the lack of a legal framework and appropriate methodology. Principles such as internal control or free management have not been legalized, while international frameworks, although they can be considered, have not been adjusted to suit domestic reality.
In addition, Mr. Hung pointed out that many enterprises do not have an independent Strategy Board or Risk Management Board on the Board of Directors. In some units, the risk management function is often concurrently assigned by the auditing department, leading to a lack of cohesion with long-term strategic orientation.
To improve efficiency, he suggested that businesses need to build a systematic risk management system with a protective layer and a unified risk identification method. He also recommended applying the three line of defense model which is widely used in global governance as an effective reference framework.
Increasing the independence of the Board of Directors and strengthening the supervisory role
Regarding the role of independent members, Mr. Hung said that, in addition to objective conditions, the core factors are professional knowledge, professional ethics and substantial independent behavior. One of the major barriers is inadequate access to information, while pressure from large shareholders or other board members still exists. He proposed to professionalize independent members through granting practice certificates, promulgating a set of ethical standards and building a specific capacity framework.
Whether as an executive or independent member, everyone has an equal responsibility before shareholders. I expect there will be legal precedent for shareholders, even if they only own 1% of shares, to be able to file a lawsuit if violations are discovered. Risks and responsibilities always go hand in hand with the role of the Board of Directors. Only when we are clearly aware of this, will each person act more carefully and responsibly, Mr. Hung emphasized.
From another perspective, Mr. Vu Quang Thinh - General Director of Dynam Capital Fund - said that in developing countries like Vietnam, transactions between stakeholders always have potential risks, especially in the context of concentrated ownership structure. Large corporations operating in essential fields such as water supply often have a parent company - subsidiary structure, and internal transactions can easily create conflicts of interest if there is a lack of an independent monitoring mechanism.
According to Mr. Thinh, the Board of Directors needs to be truly independent to represent the interests of all shareholders, not just large shareholders. He raised the question: Is the current legal framework strong enough to protect small shareholders when conflicts of interest arise?
He also pointed out that the role of the Board of Supervisors in enterprises is still vague, both in terms of power and action. He proposed that it is necessary to more clearly define the right to criticize, the right to intervene and establish a specific action mechanism so that the Supervisory Board can truly promote its supervisory role.
In the process of perfecting institutions, reviewing each member of the Board of Directors - who really creates value, who is only formal - is necessary to build an effective governance structure and towards sustainable development, said Mr. Thinh.
